Consuming More While Consuming Less: Collaborative Consumption Comes to America

The idea that the consumer is king is reflected in our government’s economic scorekeeping system, which assumes more consumer spending is good and less is bad. Conventional wisdom follows that if consumer spending is down, consumer satisfaction must be down.

But it appears that this model of consumer gluttony is being replaced by something more efficient and frankly more interesting.

Collaborative consumption is a small but fast-growing sector of the economy where consumers share, barter, or rent things to each other rather than buying and owning them. It is enabled by vastly improved information tools and technology that enables each consumer to lay hands on what they need only when they actually need it. It may stand the very notion of consumer ownership on its head.

Over the last two years, collaborative consumption websites have been springing up by the dozens to enable the sharing of different kinds of consumer items. Perhaps the splashiest debut has been Airbnb, which enables the renting of a room in your home or apartment to a visitor, but sites for renting or sharing cars, tools, wedding dresses, books, baby clothes, makeup (??) and more are up and running.

This new dynamic has the potential to upend the way we’ve thought about “stuff,” how we keep score in our economy, and fundamentally re-order business models for thousands of companies that make products of every size and kind.

Jen O’Neal and Tripping.com

Over-the-Horizon Brain Trust member Jen O’Neal is taking collaborative consumption to the travel arena in a broad and bold way. Her 18 month-old company, Tripping, has created something she classifies as “social travel,” which allows global travelers to seamlessly share everything from a spare bed to a home-cooked dinner to a cultural exchange play date with kids from another country.

Jen is no stranger to collaborative consumption companies. She was employee number five at StubHub, the company that pioneered a peer-to-peer model for sporting and entertainment event ticket re-sales.

Changing the purchase decision

Collaborative consumption companies have received an additional lift from hard economic times. “In a down economy like this, these kinds of services thrive, because they usually represent a cheaper alternative. We’ve seen members at Tripping who tell us that they decided not to splurge on Europe this year and so instead are hosting a French family they met through the site at their house. They’re getting their kids exposure to world cultures without having to pack everybody on a plane.”

But it’s not just bargains for consumers that are making collaborative consumption companies work. By allowing owners of any kind of asset – cars, homes, tools, tickets – to earn income from lending or selling the asset to a peer, the total cost of ownership gets cheaper.

“The interesting dynamic at StubHub was that the sports teams loved it,” said Jen. “It actually lowered the barriers to getting a fan to make the decision to buy season tickets. Instead of worrying they might waste tickets for games they didn’t want to go to, StubHub gave them a fairly liquid marketplace. Plus, instead of an empty seat, now there’s someone cheering for the home team, paying for a parking space, buying a beer, and buying the foam finger.”

It’s also likely that choice and selection – in everything from what kind of car you might choose to drive to your cousin’s wedding to how easily you can find a seat for an upcoming divisional baseball playoff series game – will be greater by far than we’ve ever experienced.

What’s the catch?

As far as we can tell, the catch right now is that the legal frameworks to fully support collaborative consumption dynamics are not in place everywhere. Some localities, such as San Francisco have put consumers on notice that they may be running afoul of local zoning, health and tax laws by renting out their homes short-term. Anti-scalping laws remain in place in many states and cities around the country, putting sellers at some legal jeopardy.

Jen also points out that collaborative consumption business models are a mix of capitalism, trust and generosity, and that as a result, freeloading can be a problem. “It does break down if everything is one-way, so we really try to encourage reciprocity on Tripping. I mean, I hosted a bunch of Italians here (in San Francisco) and they all cooked this pizza dinner for me from scratch. They were all throwing dough in the air…I really felt like I got something back.

We can share the women, we can share the wine.
We can share what we got of yours cause we done shared all of mine.

What to do about it

Explore the phenomenon and jump in. There are deep consumer benefits that don’t show up in GDP data, but that’s obviously the scoreboard’s problem, not yours! There’s no denying that this wave has caught the imagination of both the public and the Silicon Valley entrepreneurial set.

Collaborative consumption is squeezing the same efficiencies out of the consumer side of the economy that companies have been squeezing out on the producer side.

The kind of economic scorekeeping we use in the United States can’t keep up with the changing nature of an informationalized economy. Consumer happiness isn’t measured by the government and mechanisms don’t currently exist to capture all the under-the-radar transactions happening in the collaborative consumption world.

There could be significant implications here for any consumer manufacturer or event provider, although those effects – as in the StubHub case – aren’t necessarily negative. Businesspeople will need to be on their toes with their ears to the ground if they’re in spaces that are or may be touched by collaborative consumption.

Policymakers need to get a handle on this new reality, and should take care to see it as something to be nurtured and explored rather than something to be choked off and strangled for taxation and regulation purposes.